Nikkei 225 Rises to Pre-Earthquake Level on Yen Weakness

Dec. 27 (Bloomberg) -- Japanese shares rose, with the
Nikkei 225 Stock Average at its highest level since the day
before the 2011 record earthquake, as the yen weakened amid
calls from the new government for more monetary easing.

The Nikkei 225 climbed 0.9 percent to 10,322.98 at the
close of trading in Tokyo, its highest close since March 10,
2011, the day before the earthquake and tsunami devastated
northeastern Japan and triggered meltdowns at a nuclear power
plant. The Topix Index rose 0.8 percent to 854.09 after Prime
Minister Shinzo Abe yesterday named his cabinet ministers.

“With the new cabinet, there is even more optimism for
measures to counter deflation,” said Mitsushige Akino, Tokyo-based chief fund officer at Ichiyoshi Asset Management Co.,
which oversees about $356 million. “Stocks are reacting to a
rapidly weakening yen, as well as expectation for more monetary
easing from the Bank of Japan next month.”

The Topix is headed for an 17 percent increase this year,
its biggest annual gain since 2005, when the index surged 44
percent. The gauge trades at book value, meaning that companies
can be bought for roughly the value of their assets. The
Standard & Poor’s 500 Index trades for 2.1 times book value.

Exporters Benefit

Indexes tracking makers of electronics and cars gave the
Topix its biggest boost as a weaker yen increased the earnings
outlook for exporters.

Panasonic Corp., the maker of Viera televisions, increased
1.4 percent to 517 yen. Mazda advanced 7.1 percent to 166 yen.
The shares also rose after Nomura said the company was its top
auto-industry pick.

Toyota Motor Corp., which exports about 47 percent of the
cars made in Japan, climbed 2.6 percent to 3,930 yen. Japan’s
biggest automaker advanced even after saying it will take a $1.1
billion writedown to settle claims that its vehicles lost value
because of recalls for unintended acceleration-related issues.

Nippon Sheet Glass, which receives about 41 percent of its
revenue from Europe and 13 percent from North America, gained 16
percent to 110 yen, the biggest advance on the Nikkei 225.

Weaker Yen

The yen weakened to 85.82, its lowest level since September
2010 on speculation Abe will push the central bank to boost
asset purchases and raise its inflation target. A weaker yen
increases the value of overseas earnings when repatriated.

Financial shares rose amid optimism that the new
government’s efforts to increase monetary easing and put a stop
to deflation will boost the value of their assets and increase
borrowing demand and investments.

Abe said yesterday that “bold” monetary policy is one of
the three pillars of his economic measures. Taro Aso, named
finance minister yesterday, said that beating the strong yen and
deflation are his top priorities. Abe asked Aso to increase
coordination with the Bank of Japan and has called for
comprehensive measures to counter the yen’s strength, Aso told
reporters today.

Stimulus Hopes

“Abe is keen on changing the Bank of Japan’s inflation
target and getting the Bank of Japan to undertake aggressive
quantitative easing,” said Stephen Halmarick, Sydney-based head
of investment markets research at Colonial First State Global
Asset Management, which oversees about $150 billion. “The
market is expecting pretty significant stimulus out of the BOJ
in the new year.”

Among stocks that declined, Sharp fell 4.8 percent to 300
yen. The company hasn’t reached an agreement on the terms of its
proposed sale of its plant in Nanjing, China, to Taiwan’s Hon
Hai Precision Industry Co., the Nikkan Kogyo newspaper reported,
citing people familiar with the situation.

The Nikkei Stock Average Volatility Index rose 7.3 percent
to 23.16, indicating traders expect a swing of about 6.6 percent
on the benchmark gauge over the next 30 days. Trading volume on
the Nikkei 225 was about 50 percent above the 30-day average for
the time of day.

Japan’s markets are shut for four days next week for the
New Year holidays.